Gas prices are cheaper than last summer and miles away from the nightmare of 2022 | CNN Business (2024)

Gas prices are cheaper than last summer and miles away from the nightmare of 2022 | CNN Business (1)

Gas prices have moved steadily lower this year, helping take pressure off cash-strapped consumers.

New York CNN

Exactly two years ago Friday, gasoline prices peaked at a record of $5.02 a gallon nationally.

The gas spike of 2022 crushed consumer confidence, spooked investors and put a hole in family budgets. It helped propel the national inflation rate to 9% for the first time since the early 1980s.

“Five-dollar gas sent shockwaves through the system. No American outside of California had ever seen five-dollar gas before,” said Patrick De Haan, head of petroleum analysis at GasBuddy.

Gas prices today are not cheap – but they are miles away from that point.

The national average for regular gas stood at $3.46 a gallon on Thursday, according to AAA. Not only is that down $1.56 from the record set in June 2022, it’s down 13 cents from this point last year.

“We’ve come a long way. We’re in a much healthier and balanced market than two years ago,” said De Haan.

Of course, gas prices were cheaper during the Covid-19 pandemic because demand was severely low. Even in June 2021, the national average was a bit lower, at about $3.08 a gallon.

Driving down inflation

Gas prices peaked this spring at $3.68 a gallon on April 19. The fact that prices have moved steadily lower since then has helped take pressure off cash-strapped consumers.

Cooler gas prices have also played a central role in helping to drive down inflation.

The Bureau of Labor Statistics said this week that monthly consumer prices were unchanged between April and May for the first time in nearly two years. One of the biggest catalysts was the fact that prices at the pump have become cheaper.

The New York Stock Exchange is shown on Tuesday, June 11, 2024. Wall Street stumbled in premarket trading ahead of a busy week of inflation reports and the Federal Reserve's latest interest rate policy decision. Peter Morgan/AP Related live-story The Fed expects to cut rates just once this year

Easing inflation has kept alive hopes that the Federal Reserve will be able to start cutting interest rates at least once before the end of the year. That, in turn, would give borrowers a break from historically high rates on mortgages, credit cards and car loans.

There could be political implications, too. In part because they are so visible, gas prices play a key psychological role in how people feel about the economy.

It’s not clear if voters will — or even should — credit the White House for falling gas prices. However, a spike to $4 would likely have negative consequences for President Joe Biden’s reelection campaign, since it would feed concerns about the high cost of living and further dent relatively low consumer confidence.

“Gas prices are so central to how people think about their financial situation. They are the single most important variable in terms of how people are doing — especially low-income households,” said Mark Zandi, chief economist at Moody’s Analytics.

Drivers in some states are paying much less than a year ago for gasoline, including Utah (69 cents), Washington (47 cents) and Idaho (38 cents). There are also significant 12-month price drops in some key battleground states such as Arizona (59 cents), Wisconsin (33 cents) and Nevada (24 cents), according to AAA.

“As the summer driving season continues, Americans are seeing gas prices drop around the country,” White House spokesperson Angelo Fernández Hernández told CNN in a statement. “But there is more work to be done — the President remains committed to lowering prices at the pump for Americans and maintaining a stable and secure energy supply.”

Real gas prices are cheaper than in 2018

Many people may wish for the $2 gas prices of last decade. Of course, people are making more money than they were a decade ago, so it’s not a fair comparison.

Yet, on an inflation-adjusted basis, gas prices are right in line with where they were before Covid.

Real (inflation-adjusted) gas prices stood at $3.34 a gallon in June 2019 and $3.61 in June 2018, according to the US Energy Information Administration. The current national average of $3.46 is in the middle of that.

Although the White House spokesperson noted “historic investments” in clean energy, he also acknowledged that “record domestic oil and gas production is helping to meet our immediate needs.”

Indeed, even though the oil industry frequently battles with the White House over regulation, US oil output is off the charts.

An oil refinery in Big Spring, Texas on October 4, 2023. Brandon Bell/Getty Images Related article Why oil companies are raking in record profits under Joe Biden

Powered by the shale oil boom, the United States produced 13.2 million barrels of crude oil per day in March, according to federal statistics. That’s just shy of the record 13.3 million in November.

“Just think about where gasoline prices would be without US shale,” said Rob Thummel, senior portfolio manager at energy investment firm Tortoise.

Oil prices are higher than at this point last year, in part because OPEC+ continues to restrain production. That also reflects concerns about both the war in Ukraine and the Israel-Gaza war.

Gas prices, however, have been guided lower by improving stockpiles of gasoline.

“It’s all about inventories,” Thummel said. “Inventories are likely headed back to normal levels, which will keep gasoline prices lower throughout the summer driving season. That’s good news for consumers.”

GasBuddy’s De Haan noted that gas prices have been on the low end of what his firm was forecasting for June, in part because fewer people are driving.

If a hurricane or oil price shock is avoided, De Haan said gas prices should remain subdued. (Experts have forecast a hyperactive Atlantic hurricane season this year.)

“It’s a good outcome — dare I say a better-than-expected outcome,” he said.

Gas prices are cheaper than last summer and miles away from the nightmare of 2022 | CNN Business (2024)

FAQs

Who benefits the most when gasoline prices go down? ›

Inversely, when gas prices fall, it is cheaper to fill up the tank for both households and businesses and really eases costs on transportation-focused industries like airlines and trucking—but it also puts a damper on the domestic oil industry.

Why are gas prices higher in the summer than the winter? ›

Each spring, gas stations shift from selling winter-grade fuel to summer-grade fuel, and this is what sparks the hike in price, as summer-grade fuel is more expensive to produce. This shift is known as the seasonal gasoline transition, and it does have a very important purpose.

Why are high gas prices bad for the economy? ›

Increasing oil prices are a bad omen on Wall Street — they mean higher inflation and introduce the possibility of more economy-crushing interest rate hikes by the Federal Reserve. More pain at the pump also means less consumer spending elsewhere and a heightened possibility of recession.

Will gas prices increase or decrease in the future? ›

Gas Overview

Our real-time GAS to USD price update shows the current Gas price as $3.62 USD. According to our Gas price prediction, GAS price is expected to have a -14.09% decrease and drop as low as by June 27, 2024.

Who profits most from gas prices? ›

Here's how much Big Oil raked in as gas prices spiked:
  • Valero – $2.6 billion.
  • Phillips 66 – $2.1 billion.
  • Marathon – $3.28 billion.
  • PBF Energy – $786 million.
  • BP – $3.3 billion.
  • Exxon – $9.1 billion.
  • Chevron – $6.5 billion.
  • Shell – $6.2 billion.
Nov 8, 2023

What time of year is gas the cheapest? ›

Traditionally, gasoline prices are at their lowest during the first week of February and then begin to climb, often peaking right before Memorial Day.

What time of year is gas most expensive? ›

Unfortunately for drivers, we often see the highest gas prices during the summer, starting around Memorial Day. In May 2022, U.S. consumers paid an average of $1.50 per gallon more than they were at the same time in 2021, according to AAA. Why is gas so expensive?

Will prices go back down? ›

They're most likely gone forever. That's because prices, on average, are a one-way ticket, generally rising over time, and falling only when something has gone wrong with the economy. Officials at the Federal Reserve who set the nation's monetary policy are determined to keep it that way.

Who actually controls gas prices? ›

Petroleum prices are determined by market forces of supply and demand, not individual companies, and the price of crude oil is the primary determinant of the price we pay at the pump.

Why has gas gone up in February 2024? ›

An increase is not a surprise this time of year, because higher demand as winter winds down leads to higher rates at the gas pump. However, there are factors other than seasonal demand at play. For one, unexpected refinery shutdowns in the Midwest have affected the supply of gas.

Can gas prices cause a recession? ›

As gasoline nears $5 a gallon, economists say prices would have to go higher and stay elevated to cause a recession. "If we get to $5.50 or $6 that would be consistent with $150 for a barrel of oil. I think then, we're done. We're in for a recession," said one economist.

How much was a dozen eggs in 1924? ›

Human Progress
Data Item19151924
A dozen eggs1.651.63
A pound of ground coffee8.017.45
Ten pounds of potatoes3.533.80

What will gas cost in 2025? ›

U.S. gasoline prices are expected to average around $3.40 a gallon in 2024 and $3.20 in 2025, compared with around $3.50 in 2023, according to the EIA's Short Term Energy Outlook report.

Is there a gas shortage in 2024? ›

US natgas output to decline in 2024, while demand rises to record high, EIA says. May 7 (Reuters) - U.S. natural gas production will decline in 2024 while demand will rise to a record high, the U.S. Energy Information Administration (EIA) said in its Short Term Energy Outlook (STEO) on Tuesday.

Who benefits from higher oil prices? ›

Domestic oil producers and shareholders are reaping profits from the rise in crude oil. U.S. domestic oil producers and their shareholders are reaping the benefits of the rise in crude oil and gas prices.

Who controls the gas prices in the United States? ›

Petroleum prices are determined by market forces of supply and demand, not individual companies, and the price of crude oil is the primary determinant of the price we pay at the pump.

What stocks are affected by gas prices? ›

Lower gas prices help retailers and airline stocks, but that doesn't mean it's the only factor influencing them. Oil and gas companies in adjacent sectors can be hurt by lower gas prices, but usually the drop has to be severe. Ironically, they can also be hurt by surging gas prices due to 'demand destruction. '

How do gas prices affect consumer behavior? ›

Gas prices have a hold on consumers because they dictate how Americans shop and spend on other necessities, and they can influence travel behavior temporarily. Over time, they can even influence what vehicles consumers purchase, the appeal of far-flung housing and even development patterns, according to the Times.

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